The Congressional Budget Office (CBO) has recently updated its projections for the U.S. government’s budget deficit. Here are the key points:
- Fiscal Year 2024 Deficit:
- Deficit Trend:
- The deficit is expected to grow over the next decade.
- By 2034, it is projected to reach $2.8 trillion, equivalent to 6.9% of GDP.
- This cumulative deficit over the 2025-2034 period would total a staggering $22.1 trillion.
- Interest Costs:
- Net interest costs are anticipated to account for over 50% of the budget deficit during this period.
- Rising interest rates could exacerbate this situation.
- Assumptions:
- These projections assume no recessions and lower interest rates.
- However, if rate cuts are delayed and a recession occurs, the deficit could be even higher.
This year will mark the first year with over $1 trillion in annual interest expense on US debt.
The CBO assumes that rate cuts will soon help relieve interest expense.
However, rate cuts are all but certain.
Follow us @KobeissiLetter for real time analysis as this develops.
— The Kobeissi Letter (@KobeissiLetter) June 24, 2024
